Delaware v. Pennsylvania – The MoneyGram decision favors application of the place of sale rule

On Feb. 28, 2023, the U.S. Supreme Court (Court) in a unanimous decision handed down its decision that owner-unknown MoneyGram checks when dormant are reportable to the state in which the check was sold and not to the state of incorporation of the issuing entity. This decision cleared way for the 30 states that brought the suit against Delaware to claim the $300 million in abandoned MoneyGram checks that had previously been reported to Delaware.

What is unclaimed property?

Unclaimed property is typically defined as intangible property that is held, issued, or owed in the course of a holder’s business that has gone unclaimed for a specific period of time by the rightful owner. Once an item has remained unclaimed by the owner after a statutorily set time has passed, state laws typically require that the item be reported to the state. Over a series of cases, the Court has provided two rules regarding which state is entitled to unclaimed property. If a company has the name and address of the owner, it is reportable to the last-known address of the owner as shown on the company’s records. If the property is owner-unknown, it is reportable to the state of incorporation of the company holding the property (the Holder)  

Facts before the Court

In the case before the Court, MoneyGram did not have a regular business practice to keep records of creditor addresses for the two products at issue in the case, Agent Checks and Teller’s Checks (together, “Disputed Instruments”). While owner-known items would usually be reportable to the state of incorporation; (in MoneyGram’s case, Delaware), in 1974 Congress passed the Disposition of Abandoned Money Orders and Traveler’s Check Act (Federal Disposition Act or FDA), which provides that money orders and similar written instruments are reportable to the state in which the instrument was purchased. The question before the Court was whether or not the Disputed Instruments were subject to the FDA.  The Court appointed a Special Master to provide an analysis regarding whether the Disputed Instruments would fall under the FDA. The Special Master’s initial opinion was that they would fall under the FDA and would be reportable to the states in which the sales took place. However, in an unusual circumstance, later partially reversed his opinion after oral arguments and found in part for Delaware.

The Court’s decision

In her opinion, Justice Jackson held that a Disputed Instrument, like a money order, was a “prepaid financial instrument used to transmit a specified amount of money to a named payee”, and they had substantially similar traits and fulfilled a similar function. As a result, it was determined that the Disputed Instruments should fall within the “similar written instruments” clause of the FDA. In addition, Justice Jackson also noted that the FDA was enacted in response to an earlier Court decision,